House Committee on Ways and Means Chairman Joey Sarte Salceda pointed to first-quarter broad money data as an admonition to those calling for monetary authorities to adopt a more hawkish stance on inflation.
“The decision of the central bank on whether to increase rate hikes should be predicated on just two things: whether the country’s inflation is caused by excess liquidity in the Philippine markets and whether the rate hike relates to the causes of inflation in the Philippines. For now, the answer is largely no,” Salceda said in a statement. “So we should not self-inflict a pain that is, in all likelihood, going to be futile for addressing price concerns.”
According to Salceda, year-on-year, the Q1 broad money—a tool that measures the amount of money circulating in the economy—only expanded by 7.7 percent, while gross domestic product (GDP) expanded by 8.3 percent.
That means, Salceda said, “the real economy, for now at least, is still growing faster” than money supply.
“Money supply then, isn’t the problem with prices, as we can clearly see with the main factors: transport, fuel and energy and food,” the economist-lawmaker said. “Between inflation with growth and inflation with slower growth due to an untimely or unnecessary rate hike, I would prefer inflation with growth.”
With this, Salceda said he would discourage those who call on the Bangko Sentral ng Pilipinas (BSP) for more aggressive action on policy rates.
“I would instead call for just enough policy rate adjustments to expand our room for action should inflation momentum accelerate further. But for now, inflation is mostly not the financial sector’s fault. So financial sector action will hardly make a dent,” he added.
“The key is still to produce enough food, find cheaper energy and solve transport bottlenecks. No BSP action will be a good substitute for these three priorities,” he said.
Costly, futile
THE lawmaker said economic managers should instead “focus on the constraints in the real economy and to shield the poor from the worst effects of inflation.”
Salceda recalled his that during his time as an investment banker, “I sparred with some officials of the BSP on the central bank’s actions to support the peso during the years that immediately presaged the Asian financial crisis.”
He further explained that monetary policy action should relate directly to the cause of the economic incident being addressed.
“Otherwise, it will be costly and almost certainly futile.”
Salceda also said he supports a “Bayan Bangon Muli” package that is more “inflation-busting” than focus on more spending.
He said he would be filing a version “that is more focused on inflation-busting powers of the President and programs to remove supply constraints.”
“That is the need of the time,” Salceda added.